Iceland: a land of opportunity for investors
The country has a growing population that demands more housing and infrastructure, and ambitious plans are in place for Reykjavik and the airport area.
As a small country known internationally for its unique natural landscape, Iceland offers substantial investment opportunities relative to its size, in sectors including hospitality, logistics, real estate, renewable energy and more.
“In Iceland there are actually a couple of quite large projects coming up,” says Arnar Gudmundsson, head of foreign direct investment for Business Iceland. “By far the largest is the total development of 55 square kilometres of land around Keflavík International Airport [Iceland’s main airport].
“That’s quite a unique opportunity, because this is a transatlantic aviation hub so the project there is going to involve everything from hospitality to logistics, to an industrial park close to a deep-sea harbour as well, so it’s an exciting area.”
A masterplan for the airport and its surrounding area lays out a detailed vision to integrate transport, energy, industrial and commercial zones supported by world-class living and cultural spaces (see page 22). A multidisciplinary team, led by prestigious international planning agency KCAP and comprising many different nationalities, was selected in a competitive process to develop the masterplan.
Plenty of room for development
“We have an enormous amount of land around the airport, so there is plenty of room for development – both for the airport and other activities. In any addition to the business and industrial sites being planned, there are many opportunities in residential,” says Pálmi Freyr Randversson, managing director of Kadeco, a state-owned company that is overseeing the airport area development project, which is being marketed under the brand name K64.
K64 won The Plan Award 2023 in the Transport category. The Plan Award is an annual international prize that recognises excellence in architecture, interior design and urban planning.
Faster-than-expected population growth has created a pressing need for more housing in and around Reykjavík, and there are plans to add 2,000 apartments a year in the city over the next decade to meet demand.
A major component of the strategy to ease the pressure is Keldur, a large mixed-use development covering 116ha that includes more than 700,000 sq m of commercial, retail and residential floorspace.
Keldur is part of a corridor of dense, mixed-use urban core that runs the length of Reykjavík, from the old city centre to the eastern edge. The aim is to build a modern urban quarter, adding accommodation for up to 12,000 residents and 8,000 jobs, focused around eco-friendly transportation and land-use as part of a carbon-neutral environment.
“In 2012 we thought growth in the capital area by 2040 would be around 70,000, but already the population has grown by 50,000.”
Thorsteinn R Hermannsson, TfCA
The City of Reykjavík and Transport for the Capital Area (TfCA) have signed a memorandum of understanding (MoU) to collaborate in the development of Keldur. With the MoU, a decision was made to hold an international contest for the development of the area, which was won by Swedish architect FOJAB and engineering consultant Ramboll.
Reykjavik population growth
“In 2012 we thought growth in the capital area by 2040 would be around 70,000, but already the population has grown by 50,000 and we’re only a decade into the 25-year period,” says Thorsteinn R Hermannsson, director of development for TfCA. “We’re assuming a growth rate of 2% per year so pressure on housing is increasing. After the banking crisis [in 2008] there was slow uptake in building of apartments and housing.”
The Keldur project is part of a transportation agreement between the government of Iceland and the municipalities of the Capital Region. It aims to expedite the development of the Keldur area and construction of the Borgarlína, a bus rapid transit (BRT) system that will run through the area.
Cohesive approach
The Borgarlína BRT service is a prerequisite for transforming Keldur. The transportation agreement tasks TfCA with overseeing the development and sale of land in Keldur, as well as funding the Borgarlina project. This creates a cohesive approach to development and ensures the necessary connectivity is in place for the new quarter from the start.
All profits from the development and sale of the land will go entirely to the transportation development project in the Capital Region. The aim is to begin the BRT service at the same time as delivery of the first 100 apartments. Estimated travel time between Keldur and the old city centre in Reykjavík will be approximately 20 minutes.
The first residential plots should be delivered by 2028, and planners are looking to partner with developers to bring the plans to fruition. “We are not experts in developing big neighbourhoods, we want someone to step in and help develop in the best way possible and maximise the profit – all profits will go into transport infrastructure investment in the Capital Area,” says Hermannsson. “We want to join forces with someone who has done this before and is good at this scale.”
Hospitality opportunities
In addition to the airport development area and Keldur, there are a number of other investor-ready projects around Iceland. “There are some hospitality opportunities because we’ve been enjoying quite a fast growth in the hospitality industry in Iceland. The number of visitors has been increasing year-on-year and we are reaching pre-covid heights and exceeding them, so there is need for development there,” says Business Iceland’s Gudmundsson.
“We have an enormous amount of land around the airport, so there is plenty of room for development – both for the airport and other activities.”
Pálmi Freyr Randversson, Kadeco
As a popular stopover point between Europe and North America, Iceland has experienced steady growth of air passenger numbers due to transit traffic. But more and more people are staying on to visit the country’s spectacular scenery, or making dedicated holiday trips. The tourism industry has rebounded from the pandemic-induced decline, and the number of foreign visitors increased from just under 700,000 in 2021 to 1.7 million in 2022, according to the Icelandic Tourist Board.
With growth figures for both tourists and residents on such a strong upward trajectory, Iceland’s fundamentals point to continued unmet demand. That means major opportunities exist for international investors and partners to play a significant role in the country’s development plans.